Prevailing Wage Workers Need Effective Customized Insurance Plans
Prevailing wage workers are usually given SIMPLE employee benefit plans since it does not require annual reporting and nondiscrimination testing. However, this type of plans are not a good fit for them. While it is easy to set up, it lacks flexibility that may affect the chances of a prevailing wage contractor to win bids.
SIMPLE employee benefit plans are inadequate because of 3 major reasons
1. The amount of contribution for prevailing wage workers should be the same.
Contribution amounts cannot differ by project, job category, or job site. It must be the same for all prevailing wage workers. As a result, contractors cannot provide the whole portion of fringe benefit even if the job classification of the employee has a bigger wage determination.
To make things worse, the company will not have any savings for payroll burden which is caused by allocating the whole fringe benefit amount to employee benefit plans.
2. Contractors are not allowed to provide other types of employee benefit plans.
Some prevailing wage contractors set up additional employee benefit plans as a supplement to the existing retirement plan of prevailing wage workers. Those who own a SIMPLE plan are not allowed to do this.
3. The amount of contribution that can be deferred is limited in a SIMPLE plan.
The regular 401(k) plans permit annual deferrals with a maximum amount of $17,000 and additional $5,000 for employees who are aged 50 years and above. On the other hand, simple employee benefit plans have a lower deferral limit of $11,500 with additional $2,500 for prevailing wage workers aged 50 years and above.
Time is of the Essence if You Want to Discontinue a SIMPLE Plan
Employers should notify prevailing wage workers of their intent to discontinue their SIMPLE plan 60 days before the start of the calendar year. They should also contact the institution that provides the SIMPLE plan to inform them that contributions will no longer be made for the year.
Determine employee benefit plans better than SIMPLE plans with ARCHER JORDAN
If you are a prevailing wage contractor who’s looking for employee benefit plans that will be more beneficial to your prevailing wage workers, consulting with an experienced fringe benefits administrator will be the best thing to do. ARCHER JORDAN will gladly assist you on this task. Contact us today!